When Old Is New Again
I follow financial news looking for corollaries with the design and construction market. Interesting stories abound. AI is everywhere. At the time I’m writing this article whole S&P seems to be levitating on AI hype. If you put your money in a Mag 7 ETF, you’d be doing pretty well for yourself.
But outside of Meta, Alphabet and the like – there are also some not so obvious winners in the AI race. Caterpillar is up over 80% since April. Siemens Energy over 100%. For context, that’s not too far behind Nvidia (just about the hottest company in the world). But would you believe that Seagate is up 200+%? Can you believe that Sandisk is up 330%? The idea that an old school industrial stock like CAT could keep pace with Nvidia is crazy enough – but a 300% return on a data storage company? In the last 6 months?? I mean honestly – the last time I thought of Sandisk, I was in college buying a backup hard drive at Staples.
There are some good reasons to step back and think philosophically about what’s happening here. Sure, there were probably some really smart folks, who connected the dots and knew that Caterpillar makes equipment for cogeneration plants. Take a look at OpenAI’s Stargate development in Abilene. Turns out you need to buy basically every cogen plant left on planet earth to power a data center the size of lower Manhattan. Not a bad turn of events for an old school industrial like CAT.
And as far as legacy data storage companies are concerned – most of what we’re doing with the latest releases of AI is creating video content. The kind that needs to get stored somewhere. Like, in the same places we’ve been storing stuff since I was in college (which was a long, long time ago).
Content creators beware. You’re about to be replaced by even dumber garbage online. All stored for posterity..
Somewhere.
And apparently, by Sandisk.
That’s not the point. So, then what’s the takeaway? Should we all be crying in our beers that we missed the data storage boat? Hardly. Most of America is too worried about the grocery bill to think about investment opps in the AI tailwind. It is however a great reminder that there is a physical world behind the all-consuming digital one, that still relies on tools, services and products that haven’t changed much in a long time. And some of these dated tools/products/services, will continue to be valuable – and perhaps even grow in value – as we march into the future.
Right now, outside of data center construction, there’s not one industry that can honestly say they’re completely secure knowing what the future holds. Frankly, you should be worried about the implications of AI on your business. There will be extreme winners and losers and it’s only natural to question if you’ll be on the wrong side of history. But then again, sometimes the future has a funny way of making some old ideas look really good.
Consider commercial real estate. It was only a few short years ago that CRE values had plummeted. Why then, would Jaimie Dimon and Ken Griffin – two of the richest and smartest guys around – commit BILLIONS of dollars to building office towers in the center of New York? Was there not enough available space for them to rent? Could it be… vanity??
Doubt it. These guys are too pragmatic. Griffin’s already got $2.5B of concrete, steel and glass going up in South Florida, and homes all over the world to match. Now he’s got the green light to put up a tower the size of the Empire State Building right down the block from Jaimie’s Park Avenue icon.
Only 3 years ago there was a scurrilous rumor going around that we were NEVER, EVER going back to the office (and of course, I was the complete schnook who re-signed my lease in Feb 2020). Yet here we are today. And if you’re in NY real estate circles, you know there’s been a lot of talk on who’s going to buy the old Roosevelt hotel. Another great site in Manhattan where you can put up 2M sq ft of office. There’s a lot of big names that want in.
Why?
I’m sure those guys at the top are seeing something we’re not, and I can guarantee you IT’S NOT some misplaced executive nostalgia. That’s a story that op-ed writers who enjoyed working from home in their PJ’s used to spin. Anyone who bought that nonsense should have realized that absolutely no one spends billions of dollars in maudlin reflection.
I can’t speak for all the reasons these guys want to recommit to office, but I can tease out one narrative – and it’s related to this latest AI release. It’s about trust and security.
Consider this: the latest AI release does an AMAZING job of video creation. It’s scary how real it is. And it’s only the beginning. We already live in a world where trust is in short supply. How are we ever going to trust anyone communicating on a video feed again? Prior to the introduction of AI, we were already living in a world where loose bands of teenagers across the globe have proven adept at hacking into the world’s biggest companies and holding their data ransom for hundreds of millions of dollars. What happens when they start using AI to infiltrate virtual meetings and learn state secrets. The biggest businesses, the wealthiest people, even governments will be vulnerable. Why wouldn’t it escalate to this level of forgery as soon as it’s capable? Honestly – do they really need much to accomplish this? The bad guys already have access to photos of virtually everyone on earth (thanks Instagram!) not to mention audio resources, troves of personal information and every other tool you’d need to impersonate 80% of the planet. Think of the implications.
If I was Jaimie or Ken or any other big time money guy with a trillion bucks under management – I’d want my people right there alongside me when the big calls get made. In a world where deepfakes blur truth and our virtual security becomes increasingly tenuous, the most valuable asset may simply be knowing who’s in the room.No margin for error. No getting duped. Risk must be mitigated at all costs. If that means building a $2B tower to make sure the boss is no more than an elevator ride away from the key people – so be it.
Now let’s think about talent acquisition. Similar concerns abound. As authenticity in the virtual world nosedives, the need for trust and verification will be in high demand. We already have recruiters using AI to scan resumes, make outreach, and interact with candidates. Job seekers are already responding by using AI to produce resumes that are specifically crafted for AI to select.
….“ChatGPT – write my resume in a way that will make me a top candidate for the position of __________”…
Now take this one step further. One day soon, AI live video editing will allow you to take a zoom meeting in your bathrobe, with bed-head and a five o’clock shadow – and it will put you in a Brioni suit, with a $90 haircut, shave 5 – 10 years off your sagging face, alter your nasally voice to sound more attractive and even curb your sh*tty Long Island accent. Sound pretty good?
Not to the person hiring you.
What is old, becomes new again.
Much like the old industrial stocks whose value was overlooked, TRUST, as a commodity has been taken for granted. And the value of it is about to go through the roof.
A strange thing has happened over the last 5 or 10 years. Trust, seemingly everywhere, has eroded. I’ve mused before about the 2024 Deloitte study that reported Gen Z is twice as likely to fall for online scams as baby boomers. Let that sink in. It’s not just an anomaly – it’s an example of the unexpected byproducts of growing up with technology. Catfishing, sexting, bitcoin, employment and identity scams are all the norm. There’s been a culture created where people are literally comfortable being called “followers” and they aspire to be “influencers”. It’s appalling. In the old days that would make you a mark or a patsy – but today, no one seems to even care about the implications. Tech literacy has spawned a type of mass naivete we could have never predicted.
As a result, this truly has become the era of the grift. Endless gambling promotions, non-stop robocalls, phishing scams – you name it, we’ve got it. They wouldn’t throw these punches if we didn’t let our guard down. And now AI is about to throw the mother of all haymakers at us and we’re about to get our bell rung. Maybe it’s what we finally need to figure out that you better put your hands up if you don’t want to get hit.
I grew up in New York. A much smaller town than people would think. What used to really matter most doing business around here – was trust. Between people. REAL PEOPLE. It had to be earned. It took years of hard work to build a reputation. You couldn’t hide behind a screen. Visibility was required. Accountability was everything.
Artificial Intelligence and all its potential for fakery and new-found scams will soon proliferate society at every level. It is guaranteed to imply its malicious will on every aspect of business. When it does, TRUST – as a commodity – will be worth more than ever. A premium will be placed on doing business with venerable, time-tested businesses. People and companies that have earned their good reputations, that have track record and credibility. Brick and mortar – not virtual. Businesses that meet with their clients, their vendors, and every link of their product delivery chain in person. Business that is accountable in good times and bad. People that show up when you call them. That come to your office, stick out their hand and say “I’m Ruben, it’s a pleasure to meet you. Thank you for having me.”
So, there’s a good chance, after all is said and done, the future is going to require we revisit the business culture of the past. Where trust and verification are accomplished through community and industry networks. Where professional success is laid one brick at a time. Handshake after handshake, shoring up a reputation that will carry an individual or a business through a generation. AI may be an inevitability, but if the virtual world has proven anything, it’s that it has a serious credibility issue. It’s about time we bring back the guard rails and make them real high. The upshot may be this big town will finally feel small again.
It will be a pleasure to see you.